Railways may continue to pay dividends, bear pension liabilities and social obligation cost

Railways may continue to pay dividends, bear pension liabilities and social obligation cost

A joint committee to look into the modalities of merging the finance and rail budgets.

In what may prove to be a triple whammy for the Indian Railways, it may have to continue paying dividend to the ministry of finance, bear its social obligation cost and pension liabilities even after the rail and the Union budgets are merged.

A joint committee was formed to look into the modalities of merging the two budgets as was recommended by the National Institution for Transforming India Aayog (Niti) Aayog in a 20-page note titled ‘Dispensing with the Rail Budget’. The note jointly authored by Niti Aayog members Bibek Debroy and Kishore Desai.

The committee has two members from the railway ministry and three members from the finance ministry.

“Though we have not received any official report, the finance ministry officials in the joint committee have discussed that they are not in favour of giving waiver on dividend. They have also discussed that they are not in favour of paying for the railways’ social obligation costs and pension liabilities,” said a railway ministry official requesting anonymity.

This may further aggravate the financial woes of the railways which has been losing both freight and passenger revenues.

The Indian railways pays around Rs.10,000 crore a year to the finance ministry as dividend. Also, there are around 1.4 million pensioners under the railways who draw Rs8,000 crore per year. To top it, the national carrier is also staring at an increased financial burden of Rs40,000 crore after implementation of the 7th Pay Commission recommendations.

Newswire Press Trust of India on 9 September reported the joint committee has submitted detailed recommendations for the merger of budgets to the finance ministry.

According to another railway ministry official, who also did not want to be named, the ministry of finance will give nod to the final report submitted by the joint committee.

“We remain a passive party in this. The railway ministry has only two officials involved in the joint committee all the details of the merger will be decided by the finance ministry,” the official added.

This comes in the backdrop of the national transporter’s passenger business incurring a Rs.33,000 crore loss in 2014-15 on account of its social service costs. The pension outgo in the current financial year has been pegged at Rs.45,500 crore.

Social obligation cost includes the losses incurred by the railways due to running services below operating cost. For instance, a recent report by the Comptroller and Auditor General of India noted the railways was running trains in some suburban sections where the operating cost was as high as 750%. Social obligation cost also includes staff welfare and law and order costs.

Operating ratio is the money spent by the national carrier to earn every Rs.100.

Queries emailed to the spokespersons of the ministries of railways and ministry on 16 September remained unanswered.

According to former chairman of the Railway Board, Vivek Sahai, the railways will have to work out a way to raise its revenues.

“I would suggest that the railways concentrate on increasing its revenue as that is the only way it will be able to make up for costs of taking care of its social obligation cost, pension liabilities and dividend payout,” he said.

The railways has pegged passenger earning to grow at 12.4% with an earnings target of Rs.51,012 crore for financial year 2016-17. It plans to invest Rs.8.5 trillion in the next five years with a total capital for infrastructure for the current financial year set at Rs.1.21 trillion.